Often, when a person or company is extended financial credit and that person or company has failed to make timely payments (i.e., that credit is in default), the matter is turned over to a collection agency for resolution. Typically, the collection agency reports this “derogatory” credit information to one or more credit bureaus (e.g., Equifax, Experian, and/or TransUnion). Different collection agencies use different methods to report their credit information to the credit bureaus. Some collection agencies send their credit information to the bureaus once a month on a magnetic tape. Other collection agencies send their credit information to the bureaus on an irregular basis via various means, such as floppy disk or CD-ROM. Still others use different web technologies to transport their files. In addition, different credit bureaus may have different processes, procedures, and requirements for accepting data.
The credit bureaus then standardize the data coming in from hundreds of different collection agencies and store the data in a database. However, because of the large number of file transmissions being received, credit bureaus typically do not do an effective or timely job of matching and merging the records. The credit bureaus are receiving these data updates from derogatory sources as well as from many other sources associated with the data on a credit report. Typical data processing for one file transmission takes between 30 and 90 days. If certain fields are missing from an incoming record, the credit bureau may not effectively determine those missing fields by looking at other records associated with the same individual and/or the same collection agency. The credit bureau simply stores the record with one or more empty data fields or rejects the record completely. Subsequent attempts to retrieve that record by the missing field(s) will fail. Similarly, when that record is retrieved for a report (using other criteria), those filed(s) may be empty.
Subscribers to a credit bureau database may purchase information or request credit reports on individuals and companies. Certain collection agencies are both suppliers of credit data and subscribers to the database. A collection agency often requests data for accounts that they hold in collection. However, the collection agency may not directly update the retrieved data. The collection agency must resubmit the data to each of the credit bureaus and wait for the credit bureaus to update the database. After the data is resubmitted, the collection agency is not notified when the data is posted to the credit bureau database.
Alternatively, collection agencies may request a data update or correction by using an independent notification program called E-Oscar. For a monthly fee and a per transaction cost, collection agencies send e-mail based data updates directly to the credit bureaus. This e-mail does not constitute a direct file update, but is instead a way for collection agencies to inform a particular credit bureau that they believe an error exists in their submitted data. Most file updates, that are accepted by the bureaus in this manner, are posted to the credit bureau database within seven to ten days.
Each collection agency may be required to update more than one credit bureau with the same credit information using different formats. Similarly, each credit bureau must handle data updates coming from thousands of different collection agencies at different times in different manners. As a result, the time required to update the credit data can be days, weeks, or considerably longer.
A portion of the data is almost always out of date because collection agencies cannot access and update their data “in real time.” This incorrect data often causes a problem. For example, if a customer pays off a debt or a mistake is discovered in the data, the delay in correcting the data in the credit bureau database may harm the person or company trying to make good on their credit rating to secure additional credit (e.g., to purchase a home). Similarly, this delay may result in credit being extended to a person or company that would otherwise have been avoided.
Often, this situation leads to conflicts between the collection agency and a person or company that has paid its debt. The debt payer blames the collection agency for the delay even if the collection agency has submitted the updated credit data.